Inflation a worry until next year: Mukherjee

Inflation a worry until next year: Mukherjee

New Delhi: The government on Monday said inflation continues to remain a concern, but exuded confidence that the RBI’s monetary policy will lead to moderation in inflation in the coming months.

“But it (inflation) clearly remains a concern... But I expect the policy taken by RBI to further moderate inflation in coming months... Average inflation to be lower next year," finance minister Pranab Mukherjee said during his Budget speech for 2011-12.

Inflation, specially in high food prices, continue to worry, the minister said. Mukherjee called for improvement of distribution and marketing systems to bridge the gap between wholesale and retail prices.

“... Difference in wholesale and retail prices is not acceptable," he said.

“The total food inflation declined from 20.4% in February, 2010, to less than half, at 9.3% in January, 2011," the minister said while informing the Parliament on the inflation trend.

Food inflation has been in double digits for the most of the current fiscal. According to the latest data, food inflation stood at 11.49 per cent for the week ended 12 February.

Skyrocketing prices of vegetables, particularly onions, even forced the government to go for an export ban for some period earlier in the fiscal.

Mukherjee also put emphasis on increasing agricultural productivity to curb food inflation.

The government and the RBI have been under pressure due to inflationary pressure, particularly of food products.

The RBI has hiked short-term lending and borrowing rates six times during the current fiscal, including a hike of 25 basis points in its third quarterly review in January.

The government had earlier said it expects inflation to fall to around 7% by March-end and dip to around 5-6% by the middle of the year.

The Economic Survey released last week said the high growth rate would also affect inflation, which would be 1.5% more than what it would have been otherwise.

The survey had said high global commodity prices, particularly crude prices, are going to be affected due to the turmoil in the Middle East and this may affect the domestic trend as well.

Headline inflation has been above 8% since February, 2010. It was 8.23% in January this year.